Sterling set to slide as trade gap widens

The worst balance of payments since 1990 is putting pressure on the pound, economists have warned

The Bank of England is under growing pressure on inflation (Carl Court)

STERLING could slide this year as Britain posts its worst balance of payments
for more than two decades.

The current account deficit has ballooned to £54bn, or 3.5% of GDP, for 2012,
figures in the coming weeks are likely to show. Described as “potentially
unsustainable” by Ross Walker, economist at Royal Bank of Scotland, this
would be the biggest imbalance since 1990, and could put pressure on the
pound.

The deficit comprises the balance of trade — the difference between imports
and exports — plus other flows of cash, such as investment income and
foreign aid.

Experts say it is highly unusual to run such a large external deficit during a
period of economic weakness.

The current shortfall, reflecting Britain’s deteriorating trade deficit and a
sharp drop in income from overseas assets, is “an amber warning light for
sterling”, said Walker. “A slide in the currency might be welcomed by UK
exporters,